The global economic downturn continues to make its impact. A few months ago, I mentioned the possibility that patents might be used to leverage credit, in the face of cautious lenders. Bloomberg.com is reporting that firms might be more desperate:
“Small-cap technology companies from Silicon Valley to Israel, struggling to raise enough money to survive amid the credit crisis, are selling prized patents to stay in business. … VocalTec Communications Ltd. Chief Executive Officer Ido Gur said he needed to sell 15 of the Israeli company’s 22 inventions to raise money to market its main Internet phone software.
The Bloomberg article is littered with anecdotes and examples. One chairman suggests the lack of credit led to declining sales, and companies began to sell IP for quick revenue. The fact that patent holders are boldly selling their rights rather than using them for collateral credit makes sense, at least on the surface. Lenders are still cautious, and the recession is putting a lot of pressure on businesses. Selling intellectual property assets may be the only viable way out, especially if a company lacks the resources to develop an invention and market it.
The article also notes that high-skilled workers are being laid off, and speculates that they may be taking intellectual property rights with them. This trend is worth watching, but seems like it would be too rare to cause a large shift in intellectual property. Many major technology firms are quite possessive of their patents, using employment contracts that keep IP rights with the company. Under other circumstances where employees have the bargaining power to keep a larger stake in their inventions, they will be too important to the company to be laid off. Then again, with no end in sight to the recession, anything is possible.
Although the article notes that applications for intellectual property transfers have markedly increased in the U.S. and U.K., Neil Wilkof remains skeptical. He claims that this trend may have an alternative explanation, and that the increase in transfers could happen for any number of reasons. He concedes that assets will shift around, but mostly due to an increase in mergers and acquisitions. Wilkof concludes with the following comment:
“I am sure that the current recession will lead to some significant changes in the use and commercialization of patents. But I remain unconvinced that a significant increase in the sale of patent portfolios will be one of them.”
We will have to wait and see what the ultimate effects of the recession are. It is possible that this is the beginning of a mass sale of patents. Perhaps not. Either way, there will be many interesting implications for intellectual property in the shifting economic climate.
One Response
I agree with Neil Wilkof that the current recession will not lead to a significant increase in the sale of patents. This is perhaps the mass sale of patents has already begun! When I performed a Google search with the keywords “patents for sale”, I was surprised to see hundreds of hits returned. These included:
http://www.freepatentauction.com
http://www.shop4patents.com
http://www.ideabuyer.com
http://www.newideatrade.com
If these websites are indeed legitimate, they seem to facilitate the buying and selling of patents. I can only begin to imagine what the emergence of a patent free market would be like, where patents are bought, sold, held and traded easily. I would imagine that there would be three categories of companies:
1) Idea generating companies: The mandate of these companies would be to churn out as many ideas as possible, patent them, and sell them.
2) Middle-man companies: The mandate of these companies would be to filter through the market of patents, purchase patents and re-sell them for a higher price.
3) Giant manufacturing companies: These companies would have enough resources to purchase patents from the middle-man companies and manufacture the patented product.
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